Magazine

All Net, All the Time

April 28, 2002

James J. Whitney has an insatiable appetite for the Net. The Chicago-based consultant travels three days a week with two laptops in tow. But he never brings along any cables or cords. Instead, he sniffs out wireless networks that let him connect to the Web at wicked speeds. For $30 per month, he can check his e-mail before boarding at Chicago's O'Hare International Airport. When he touches down in San Francisco, the same fee covers Net access at the Omni Hotel. On a recent visit to the Bay Area, Whitney parked outside Moscone Convention Center, logged on via another untethered Net connection--this time for free--and chatted online with colleagues in Bangkok. Even at the office, he rarely uses wires. "Oftentimes, a jack isn't convenient," says Whitney, an info-tech consultant with Forsythe Solutions Group Inc. "It's all about freedom."

How does he do it? Whitney is one of 2 million people worldwide using a new kind of network called Wireless Fidelity, or Wi-Fi. It's nothing like the mobile wireless phone systems most people use, which still offer rudimentary Internet connections about half as fast as today's PC modems. Wi-Fi networks can hit 11 megabits a second, nearly 200 times faster than a dial-up modem. That's speedy enough to handle everything from large e-mail attachments to videoconferencing, provided the Wi-Fi antenna is connected to a broadband link such as a cable modem. These networks, covering just a few thousand square feet each, are increasingly popular in homes. And they're popping up by the thousands at "hot spots" in offices, hotels, caf?s, and parks.

Wi-Fi is spreading fast. By next year, more than 5.4 million people worldwide are expected to use the technology regularly, according to researcher Gartner Group Inc. The number of networks available to Web surfers is expected to top 15,000 by the end of 2003, up from 1,100 last year. And those are just the public networks.

Consumers and companies large and small are deploying hundreds of thousands of such networks at sites around the globe. Microsoft Corp. is fueling the movement by weaving software into its operating systems that alerts users when they come within range of a Wi-Fi network. Wireless equipment vendors Cisco Systems Inc. and Agere Systems Inc. have made Wi-Fi innovation a top priority. And computer makers such as Apple, Compaq, and Dell are building Wi-Fi radios into notebook and handheld PCs. By 2004, more than 45 million business laptops--two-thirds of the total in use--will be Wi-Fi-capable. "We're seeing it explode," says Joe Peterson, a general manager at Microsoft.

Despite its startling growth, Wi-Fi must overcome big hurdles before it lives up to its promise. The most challenging is security. The technology's radio signals easily penetrate the walls of businesses and homes where the networks reside: From the concourse outside the American Airlines Admiral's Club at O'Hare, you can log on to the club's Wi-Fi network. And the limited range of the networks means they're available in only tiny pockets, mostly in major cities. Until Wi-Fi networks offer better security and far more extensive service, their use will be limited mostly to niche groups like mobile professionals and tech geeks.

Wi-Fi may face regulatory obstacles as well. Most Wi-Fi systems operate in an unregulated portion of the frequency spectrum that's used by cordless phones, baby monitors, and microwave ovens. But Sirius Satellite Radio and XM Satellite Radio Holdings Inc. have asked the Federal Communications Commission to clamp down on the technology, claiming Wi-Fi signals interfere with their broadcasts. While FCC Chairman Michael Powell has cautioned that Wi-Fi could eventually cause a "meltdown" of overtaxed frequencies, the commission has no immediate plans to regulate it. Wi-Fi is a "resounding success story," says Julius E. Knapp, deputy chief of the FCC's Office of Engineering & Technology.

Indeed, Wi-Fi has the potential to reshape the workplace-- and dramatically boost productivity, too. Workers can take laptops to meetings, the cafeteria, the warehouse, or the parking lot. The result: Employees with access to Wi-Fi stay online an average of 105 additional minutes a day, according to London-based NOP Research Group. Merrill Lynch & Co. is sold on the idea. The investment bank now deploys Wi-Fi at every new location it opens. "It untethers employees from the desktop," says Aron Miodownik, Merrill's technology strategy chief. Better yet, Miodownik says Wi-Fi has made his group 20% more productive. "You're making real-time decisions by logging on to the Web right in a meeting, rather than having to hold another meeting once you have the data," he says.

Wi-Fi's early appeal, though, was about as far from Merrill suits as you can get. Instead, its roots are steeped in counterculture. Think Napster. Think hackers. Some Wi-Fi aficionados hunt down unprotected networks that anyone can use to surf the Web surreptitiously. In tech havens like New York and Silicon Valley, these laptop-toting enthusiasts put $50 antennas into their computers and ride around town sniffing out corporate networks.

Other Wi-Fi networks have been built much like an old-fashioned barn-raising. They start by leasing a high-speed phone or cable line, which can cost anywhere from $40 to $200 a month. They plug that line into a $175 wireless base station. Tack on a $100 antenna, and anyone within a few hundred feet can get online--all they need is a computer equipped with a receiver card. "People need to be shaken out of the mind-set that the only ones who can provide communications are the phone companies," says Matt Westervelt, co-founder of Seattle Wireless, an early community network group. "We're trying to say that people can build it themselves, so let them do it".

The grassroots movement is bringing speedy Net access to people who wouldn't get high-speed service any other way. About 30 families in the hills of Sonoma County, Calif., live too far from the nearest phone switch to get a high-speed digital subscriber line connection. So they're building one themselves. The neighborhood group plans to lease a $200-a-month DSL line from Sonic.net Inc., an Internet service provider in Sebastopol, five miles away. Then they'll use a powerful antenna to shoot that signal to a relay on a hill near them and down into their neighborhood, creating a Wi-Fi network for everyone to share. The system is expected to be up and running by June. "There is a saying that people don't do something unless it's for hope, fear, or greed. In this case, it's mostly hope," says Peter Rowell, an independent software consultant who lives in the area. "It has brought out the best in everyone."

Wi-Fi isn't just a freebie phenomenon. Nearly half a dozen carriers such as Boingo, hereUare Communications, and iPass are looking to cash in by offering paid service. Some of these companies, like WiFi Metro, operate their own networks. Others, like Boingo, are consolidating small, independent networks into nationwide systems. Boingo users pay $75 a month for a password that allows them to tap into Wi-Fi hot spots around the country. Even Starbucks Corp. is getting in on the act: The company offers Wi-Fi access in 600 of its coffee shops for $30 a month and plans to roll the service out to 4,000 stores by the end of 2003.

All of this gives traditional telephone and cable-TV companies the jitters. Wi-Fi threatens the growth of DSL and cable-modem service because it allows dozens of people to share a single line. While some small ISPs like Sonic.net and New York-based Bway.net allow clients to set up Wi-Fi systems, wireless community networks should not assume they're home free. Heavyweights such as Verizon Communications Inc. and AT&T Broadband forbid it and can cut off customers who share their connections with others.

That hasn't happened yet, but big carriers have started to cruise the streets of big cities monitoring Wi-Fi networks. They've found a surge in activity during the past two months and say they may soon get tough on Wi-Fi operators. "We are taking it seriously," says Sarah Eder, a spokeswoman at AT&T Broadband headquarters in Denver. One option: charging customers for how much they use the network, which would make connection-sharing far less attractive.

Cell-phone companies should be looking over their shoulders, too. As growth in voice calling slows, carriers are counting on Net-access revenues to boom. Cellular kingpins such as Verizon Wireless Inc. and Cingular Wireless are spending billions on licenses and equipment for next-generation systems. They want to cash in on a data market that researcher Sanford C. Bernstein & Co. projects will grow to $5 billion in 2003, up from $1.2 billion this year.

Wi-Fi's mini-Nets could put such investments at risk. Hot spots are much cheaper to build than 3G wireless phone systems. Their connection speeds are far faster than anything the cell-phone companies will offer anytime soon. And while they aren't as extensive and don't offer the mobility of cell-phone networks, they cover a lot of public places like airports and hotels.

Some carriers are wising up to the threat. VoiceStream Wireless Inc. has launched its own Wi-Fi system, which powers networks for Starbucks and others. "There are clear trends that we can't ignore," says Cole J. Brodman, VoiceStream's senior vice-president for product development. Sprint Corp. (FON) has invested in Boingo. And within a year, AT&T Wireless (AWE) plans to offer Wi-Fi as a complement to its mobile voice and data services. For example, an executive might use her cell phone to check headlines while she's in a cab on the way to the airport. But to surf the Web, she might boot up her laptop at the airport lounge and use a faster Wi-Fi connection. "We don't see Wi-Fi as so much of a threat as an opportunity," says James C. Grams, senior vice-president for mobile multimedia services at AT&T Wireless.

The biggest opportunity may be at home. By 2004, some 4.2 million U.S. homes will have wireless networks--mostly Wi-Fi--up from 835,000 last year, according to researcher International Data Corp. Why? The main impetus today is to share a Net connection among family members and get online from the bedroom, den, or kitchen without running wires. Consumer-electronics manufacturers such as Sony Corp. and Philips Electronics are planning to integrate Wi-Fi technology into stereos and TVs so people will be able to view streaming video or listen to MP3 music files anywhere in the house. One of those who already has a Wi-Fi network installed is Larsh M. Johnson, chief technical officer at eMeter Corp., a Redwood City (Calif.) startup that provides metering services to utilities. Johnson says he often checks e-mail in the kitchen and books flights from the living room while watching a ball game. "It's a lot easier if you can drag your laptop to the couch and hop online," he says.

There's plenty of Wi-Fi opportunity at work, too. Consider Wells' Dairy Inc., an ice-cream maker in Le Mars, Iowa. The dairy discovered wireless by accident in 1999 when a sales office needed to expand its computer network to accommodate more workers but didn't have the necessary gear on hand. So network engineer James D. Kirby sent a wireless kit to the salespeople, who set it up in a snap. Now, dozens of extra workers can access the company's local-area network. Now, every Wells' office is equipped with Wi-Fi networks, which serve 900 employees--nearly half the workforce. Workers carry their laptops everywhere, and even printers are hooked up wirelessly to the network and placed on carts that can be wheeled to different locations. "For the last year and a half, I have not been in a meeting where people didn't have their laptops," Kirby says. Wireless saves Kirby's staff up to 10 hours a week in technical support time because workers don't have to maintain as many data lines.

That's the kind of story Wi-Fi equipment makers love to hear. Vendors such as Cisco and Agere (AGR.A) are selling the technology as a way for corporations to cut costs and boost productivity. The cost of wireless gear, installation, and support comes to about $500 per year, or $1 to $2 a day, for each user, according to Cisco (CSCO), the world's largest maker of wireless equipment for enterprises. Assuming the average corporate employee costs $100,000 to $300,000 a year in salary and benefits, a company can recoup its $500 investment by squeezing just a few extra minutes of work a day out of each one, Cisco says. "If you believe you can increase an employee's productivity by 1 to 2 minutes a day, you've paid back the cost of wireless," says Larry Birenbaum, general manager of Cisco's Ethernet Access Group.

Some organizations don't believe the productivity increase is worth the security risk. At Lawrence Livermore National Laboratory, a California facility for developing nuclear weapons, a handful of workers started using Wi-Fi gear without authorization. While no classified information was lost, officials at the lab shut it down for fear that security would be compromised. "The technology is moving faster than our ability to keep up with it," says Theodore C. Michels, acting chief information officer at Livermore.

Equipment vendors argue that Wi-Fi is becoming secure enough for most businesses. Cisco, Agere, and Symbol Technologies (SBL) are feverishly building systems they say keep the network door slammed shut. That they say high-end gear--used by corporations--now comes with complicated encryption keys, which change for every person and every session, and authentication features that only let in users with the proper ID. "We truly believe that security is becoming a nonissue," says Cisco's Birenbaum.

One way companies can squeeze extra minutes from employees is by keeping workers busy on the road. Luxury hotels that cater to business travelers recognize that guests don't care much for pokey dial-up Internet connections in their rooms. Some 600 U.S. hotels offer wireless networks today, a number that Gartner expects will grow to 5,800 by yearend 2004. In chasing business travelers, wireless access provider Wayport Inc. has carved a niche in hotel-based Wi-Fi. It serves more than 400 U.S. hotels, providing the customer support and taking a slice of the revenue. "Hotels are coming to us to help deploy Wi-Fi so they can get more heads in beds," says Wayport Chief Executive Dave Vucina.

Even tiny businesses are riding the wave. Access providers like Surf and Sip Network and WiFi Metro are teaming up with shop owners to offer Wi-Fi to customers in caf?s: Gartner expects 12,000 of these coffee-shop networks by yearend 2004, up from about 500 today. At Dolores Park Caf? in San Francisco, laptop-toting patrons surf the Net while slurping mango smoothies. The service attracts telecommuters with disposable income, says owner Rachel Herbert. And they stay longer. Because they can read e-mail while dining, customers who once spent $5 for a quick lunch are sticking around and dropping $10. Wi-Fi has boosted sales by 3%, Herbert says--"a nice added bonus at the end of the month."

For many users, the Wi-Fi movement is bringing bonus value all month long. Businesses from the quaint Dolores Caf? to the 17-story Omni San Francisco realize Wi-Fi can captivate new customers and boost revenues. They know the technology can win over everyone from high-tech homebodies to itinerant execs like James Whitney. "I want to be work-enabled no matter where I am," Whitney says. That means connecting via Wi-Fi, the method of choice for Net nomads everywhere. By Roger O. Crockett in Chicago, with Heather Green in New York, Andy Reinhardt in Paris, and Jay Greene in Seattle